Essays on the design of innovative subscription-based business models
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This dissertation consists of three essays that study operations management problems of emerging subscription-based business models. The first essay, coauthored with Pnina Feldman and Ella Segev, investigates the personalized subscription box business model where a firm selects and delivers products that are curated to match each customer’s tastes and preferences. Specifically, this essay investigates how firms may optimally learn customer tastes, and personalize their offerings in order to maximize their revenue. Doing so, we investigate the optimal pricing and return policies of a firm operating with the personalized subscription box business model. The second essay in this dissertation studies the coordination problem of a two-sided media streaming platform that aggregates first and third-party content in a bundle and offer the bundle to users for a subscription fee. Media streaming platforms face a trade-off between maximizing their user base by attracting premium content providers and the costs due to the outside options of the providers. We study the effectiveness of platform’s strategic investment in first-party content to attract premium providers under conventional revenue-allocation mechanisms. The third essay in this dissertation studies two-sided media streaming platforms that offer both first- and third-party content, but strategically steer users to the first-party content, which is most profitable to the platform. Platforms do so by manipulating their recommendation systems. In this case the platform may choose to recommend a content that is different from a user’s optimal preferences. The purpose of this paper is two-fold. First, we explore the effect of platform’s first-party content bias on users’ search behavior. Second, we study the effect of users’ search cost and the third-party provider’s royalty fee on the design of recommendation systems.